For troubleshooting, I would make the GRUB entry as simple as possible:

title Vectorkernel (hd0,2)/boot/vmlinuz root=/dev/hda3 ro vga=normal

You can also try booting VL using the install CD. There is a point where it asks you to press Enter to continue, or type in the path to your installation. Modify the example to fit your system. If it boots okay that way you know the install is good.

Tried everything as per your suggestion but nothing seem to work. Tried the boot from hard disk as well with live usb but it complained about partition being rw, it has to be read-only. Then i changed to read-only when it started complaining about Kernel panic and VFS syncing error. Kind of catch-22 situation here. Not sure if it is an installation issue or something else. Maybe i'll try downloading v6.0 and see if that goes through ok.

Don't remember exactly but something about "Root partition cannot be read only, this is a serious error. VFS Syncing" Since it didn't give me terminal prompt or anything i was forced to do hard reboot and didn't write down the error message which was about a full screen.

Try booting VL using the install CD and see if the installation is good. You posted something about trying VL6... if you are still using a 5.x series, I would highly recommend upgrading to a newer version.

Yes, I did install VL6 and didnt had much issues w.r.t Grub until i uninstalled one pkg and it borked my system. Was little surprised since it didnt list out what all would be removed but finally i had a completely dead system. Was quite disappointed, will reinstall again over the weekend..